Is trust or innovation more important to today’s banking customers?

Trust seems to have come crashing into the public consciousness in the last year or so – from dominating the agenda at the World Economic Forum featuring in our very own Fujitsu Forum keynote.

But for the financial services sector, the issue of trust really came to the fore a decade earlier, with the 2008 banking crisis. The standing of financial institutions that had operated for hundreds of years was shaken, especially in the UK and Ireland.

Ten years on, and the banking sector looks very different. The way that we access banking services – and even who we access them from – has changed rapidly, largely due to digital technology.

But public sentiment is still key. Digital banking services present their own trust challenges, particularly when it comes to privacy and cybersecurity.

And of course, there are new challenger banks from Monzo to TransferMate building relationships with consumers virtually from scratch.

So, in this new banking landscape, how have attitudes to financial institutions changed?

In our latest report, we asked 2,500 British and Irish consumers how they feel about banks today, alongside a wider survey of their European counterparts. Is innovation everything, or are trust and transparency crucial?

Trust is growing – depending on who you are

Positively, despite taking a battering during the financial crisis, the reputations of banks are recovering. A third of British and Irish consumers say that they trust their bank more than five years ago, while only 19% and 24% respectively trust them less.

But perhaps as a legacy of the crash, consumers are more likely to trust longer standing financial institutions.

When it comes to challenger banks, a quarter of Irish consumers and a staggering 40% of British consumers don’t trust them at all – making British consumers the most cynical of these new institutions in Europe.

Insurers also have some issues with consumer perceptions, as a quarter of consumers in the UK and Ireland don’t trust them at all. By contrast, over a third trust traditional high street banks completely.

Reputation is still important, and levels of trust seem to influence where people choose to bank.

Three quarters of Irish and British consumers bank only with a traditional high street bank – which is significantly higher than their counterparts on the continent. Meanwhile, just one in ten are only using a challenger bank.

Digital services demand trust

Digital banking services have brought a whole new dynamic into consumers’ relationships with banks. Customers are now being asked to trust banks not only with their money, but with their data.

And it’s not something that consumers are necessarily comfortable with. Today Irish and British customers’ main banking fears are that their provider doesn’t have the right technology to keep their data secure (17% and 14%) – or that they don’t know how their personal data is being used (14% and 12%).

And again, the kind of financial institution appears to have a direct impact on customers’ levels of trust. In the UK, while a third of consumers don’t trust challenger banks or insurers to keep their data safe, this falls to a quarter when considering traditional banks.

Irish consumers are even more sceptical about the safety of their data, whether it’s held by insurers (37%), challengers (37%) or even traditional banks (33%).

Concerns are also making many customers reticent to use digital banking services at all, threatening the effectiveness of services like Open Banking.

More than half of consumers in the UK and Ireland worry that new technologies will put their data at risk, while a similar proportion say that this would prevent them from adopting more digital banking services in the future.

With that in mind, while consumers would welcome the adoption of some technologies by their banks, others like cryptocurrencies and artificial intelligence would put them off.

It’s clear that banks must take a nuanced approach to new technology, to encourage adoption and making it a selling point, not a weakness.

Innovation matters, but so do traditional channels

All of that said, it’s clear that innovation matters to British and Irish consumers. The majority agree that their banking experience is better than it was five years ago (57% and 68% respectively), and half say that access to good digital services is a high priority when selecting a traditional bank.

In fact, despite their loyalty to traditional banks, a quarter of consumers in the UK expect to switch to a challenger bank in five years’ time, unless traditional banks provide the same level of digital services. This rises to nearly a third of consumers in Ireland.

But for British and Irish consumers especially, traditional high street banking services are still important. Two thirds of consumers are more likely to do business with a bank if it has a high street branch, while three in five prefer to deal with a human – not technology – if they’re resolving an issue.

In the UK and Ireland, it seems that banks will need to offer a combination of in-person, traditional services and innovative digital services to keep consumers happy. For many, having both elements to their relationship is key to building trust.

Creating lasting relationships

Banking has changed over the last ten years. Perhaps more than ever before, consumers expect banks to offer the convenience and speed of digital services, and are prepared to leave them if they don’t.

With new technology, banks and insurers can offer all kinds of new services to consumers, including personalisation, speed and safety.

But consumers don’t want innovation at any cost – and being able to offer the advantages of these new technologies depends on earning consumer trust.

Financial institutions will need to prove their trustworthiness through watertight security and transparency on exactly how and why personal data is used.

It’s also about communicating new innovations to customers, to ensure they are comfortable with the changes coming.

So perhaps as always in the banking world, when it comes to a choice between trust or innovation, consumers want both.